Three Representative Reactions to the CBO's Long-Term Budget Outlook

We understand the current-law baseline--it says that PAYGO and health-care reform do what their enabling laws say that they do, and that they bend the deficit curve, and get us to near balance. They are, as CBO agrees, the largest long-run deficit-reducing policy changes in American history. We are proud of that--the task now is to make sure that the health-care spending restraint they apply is smart restraint, that cuts fat and not meat and bone out of our health care system.

But the alternative fiscal scenario... We don't understand. It's as if CBO has decided that every single cost-saving and revenue-increasing provision of the PPACA is going to be repealed on December 31, 2020 at the end of its ten-year budget window, and that thereafter we are going back to pre-March business-as-usual. I understand that the alternative baseline is supposed to take current law and add to it those legislative changes that CBO believes will have overwhelming congressional support when they come to the floor. But how is total repeal of the cost-saving and revenue-increasing provisions of the PPACA supposed to have overwhelming congressional support? Yes, there is the example of the Medicare doc fix. But the doc fix is an anomaly--nearly every other payment change over the past generation has, once enacted, stuck and not been repealed due to political pressure.

I can see not believing that all of the cost-saving and revenue-raising provisions of the PPACA will stick beyond 2020. But none of them? That makes no sense.

Republican:

Elmendorf. That partisan little *&@^#. If he didn't think ObamaCare would bend the long-run health-care cost curve, he should have said so nine months ago--rather than waiting until today.

Technocrat:

This alternative fiscal baseline scenario... it clearly needs to be better motivated. It's no longer what it was originally--that we all know that the R&D tax credit and the Medicare doc fix are permanent policies, and we all know that the only reason congress extends them for a year at a time and only a year at at time is that threatening businesses and doctors with their expiration is a marvelous fund-raising tool, so let's be honest budgetarily and include in our baseline all the things that we inow congress will do because congressional support for the underlying policies is overwhelming.

Now the alternative fiscal scenarios is... something else. There is now an 8% of GDP wedge between the 75-year fiscal balances as calculated by current law and by the alternative scenario. Lots of the changes from current law in the alternative baseline are things that do not have overwhelming congressional support now, and that it is not clear why anybody should think that they will have overwhelming congressional support in 2020 let alone 2050.

The alternative baseline is now based on judgments about the strength of the doctors' lobby and about the configuration of American rent-seeking politics rather than being merely an attempt to construct an honest baseline. It's not clear to me that CBO has the expertise to make such judgments. It is clear to me that if it is going to make them, it needs to back tyhem up much more comprehensively than it has done.

Comments

We understand the current-law baseline--it says that PAYGO and health-care reform do what their enabling laws say that they do, and that they bend the deficit curve, and get us to near balance. They are, as CBO agrees, the largest long-run deficit-reducing policy changes in American history. We are proud of that--the task now is to make sure that the health-care spending restraint they apply is smart restraint, that cuts fat and not meat and bone out of our health care system.

But the alternative fiscal scenario... We don't understand. It's as if CBO has decided that every single cost-saving and revenue-increasing provision of the PPACA is going to be repealed on December 31, 2020 at the end of its ten-year budget window, and that thereafter we are going back to pre-March business-as-usual. I understand that the alternative baseline is supposed to take current law and add to it those legislative changes that CBO believes will have overwhelming congressional support when they come to the floor. But how is total repeal of the cost-saving and revenue-increasing provisions of the PPACA supposed to have overwhelming congressional support? Yes, there is the example of the Medicare doc fix. But the doc fix is an anomaly--nearly every other payment change over the past generation has, once enacted, stuck and not been repealed due to political pressure.

I can see not believing that all of the cost-saving and revenue-raising provisions of the PPACA will stick beyond 2020. But none of them? That makes no sense.

Republican:

Elmendorf. That partisan little *&@^#. If he didn't think ObamaCare would bend the long-run health-care cost curve, he should have said so nine months ago--rather than waiting until today.

Technocrat:

This alternative fiscal baseline scenario... it clearly needs to be better motivated. It's no longer what it was originally--that we all know that the R&D tax credit and the Medicare doc fix are permanent policies, and we all know that the only reason congress extends them for a year at a time and only a year at at time is that threatening businesses and doctors with their expiration is a marvelous fund-raising tool, so let's be honest budgetarily and include in our baseline all the things that we inow congress will do because congressional support for the underlying policies is overwhelming.

Now the alternative fiscal scenarios is... something else. There is now an 8% of GDP wedge between the 75-year fiscal balances as calculated by current law and by the alternative scenario. Lots of the changes from current law in the alternative baseline are things that do not have overwhelming congressional support now, and that it is not clear why anybody should think that they will have overwhelming congressional support in 2020 let alone 2050.

The alternative baseline is now based on judgments about the strength of the doctors' lobby and about the configuration of American rent-seeking politics rather than being merely an attempt to construct an honest baseline. It's not clear to me that CBO has the expertise to make such judgments. It is clear to me that if it is going to make them, it needs to back tyhem up much more comprehensively than it has done.